An ICSID Tribunal ordered RSM, an investor company from United States which admitted that it had received funding from a third party, to post a guarantee of US$750,000 to ensure that it could pay Respondent Saint Lucia's legal costs if it was ordered to do so at the end of the arbitration proceedings. The same tribunal had previously obligated RSM in the same proceedings to pay all of the advances towards the administrative costs of the arbitration which is traditionally split evenly between the two parties.
This provisional award also received significant attention given its potential impact on ongoing investor-state claims that are being supported by third party funders. From a state's perspective, this award clearly illustrates the tribunals' concern that a claimant may not comply with a costs award rendered against it, since, in the absence of security or guarantees being offered, it is doubtful whether the third party will assume responsibility for honoring such an award.
In his assenting opinion, Gavan Griffith QC emphasized that the funder, as a stranger to BIT entitlement, should remain at the same real risk level for costs as the nominal claimant. In his opinion he expressed that "the integrity of the BIT regimes is apt to be recalibrated in the case of a third party funder, related or unrelated, to mandate that its real exposure to costs orders which may go one way to it on success should flow the other direction on failure". This language is particularly curious because in a 2011 opinion on the same issue as to whether an allegedly impecunious claimant being funded by a third-party should post a security for costs, Mr. Griffith had noted that "the tribunal does not regard [the possibility that a respondent might not be able to recover its costs given that a third-party funder would not be bound on any award on costs in its favor] of such third-party funding as a relevant factor to improve the position of the Respondent on this costs application" and denied the Respondent's request for security for costs. See, Bozbey Insaat Sanayi ve Ticaret Ltd. Sti. and Omer Faruk Bozbey v. Government of Turkmenistan, PCA Case No. 2011-2. The views expressed by Mr. Griffith in RSM are diametrically opposed to those he articulated in Bozbey merely three years ago. It will be interesting to see how Griffith justifies this complete change in direction in his thinking on the issue—i.e. whether the facts of RSM were significantly different from that of Bozbey or that Griffith's views on funding evolved in these last three years. At any rate, this should also serve notice to disputing parties that in this relatively new and unchartered area of as third-party funding, parties should be even more careful about selecting arbitrators as the arbitrators' opinions on this issue may be have shifted or evolved significantly in a relatively short period of time, as it seemingly is the case with Griffith.
By using the language "Only in an Imaginary Wonderland" Judge Edward W. Nottingham, appointed by the claimant, took a different approach from the other two members of the tribunal. In his dissenting opinion, Nottingham stated: " The general concerns about third-party funding and security for costs can and should be addressed by the Administrative Council in its rule-making capacity, if there is a problem that needs to be dealt with". Nottingham also wrote that an individual tribunal should not be using general language of unlimited elasticity to accomplish the result, which the tribunal regarded as appropriate.
Given the fact that third-party funding is increasing in the investment arbitration practice, RSM v St.Lucia, might create a big question mark for funders in the market. While the issue of security for costs is generally not considered as an element of both risk and potential cost payment by third-party funders, RSM decision might create a paradigm shift in the way funders think about this issue.
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